Who is cheating Europe on natural gas prices? Look at the man in the middle

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Neither the US government nor its drillers are responsible for the high prices Europe pays to import US natural gas, an industry expert said this week.

Anna Mikulska, who studies the geopolitics of natural gas, said the price stems from the seller’s response to the market.

“The United States is a big supplier of European natural gas, but it’s not the American producers,” said Mikulska, a fellow at the Center for Energy Studies at the Baker Institute. “These are the companies that buy the gas from American producers, and it usually goes where the price is highest.”

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German Economy Minister Robert Habek on Tuesday accused the United States and other countries of charging excessive prices for natural gas. The largest U.S. liquefied natural gas exporter, Houston-based Cheniere Energy Partners, did not respond to a request for comment.

Full European storage

Europe appears to be meeting its goal of storing enough natural gas for next winter, Mikulska said, a view shared by Goldman Sachs and the International Energy Agency.

“Storage right now is at a very high level, sometimes at 100%, most of the time over 80%,” Mikulska said Wednesday during the Baker Institute’s winter market update. “Europe really wanted their storage full this time around. They kind of learned a lesson last winter that it’s not a good thing (to have less than full) especially if the supply is not given or is uncertain.

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Europe has bolstered its storage not only by importing more gas from alternative sources, but by limiting the industrial use of natural gas, forcing some companies to move production outside of Europe.

“It hasn’t been free,” she said. “This came at the cost of reduced demand in the industry. And that is the big story of this winter and the year to come. It’s not just about the inability to heat homes, which you’re obviously going to prevent, but it’s about Europe’s ability to recover from the industrial downturn caused by the reduction in the supply of industry gas.

A cold winter could shatter European unity, she added, as each EU country has its own energy policy, and they could be in competition or conflict.

“If it’s very cold, we will see, probably, it will be a test for European solidarity and Europe’s ability to manage its demand as a whole.”

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Summer might not bring much relief next year either, she added, if Europe has to fill its storage without any Russian gas. “It might be difficult,” she said.

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